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A 2020 Guide To Redundancies And Settlement Agreements

Prior to 2020 redundancies were few and far between, but since the impact of coronavirus, they have unfortunately become a frequent occurrence. With the uncertain economic conditions and the use of furlough scheme, navigating a redundancy can be a daunting situation.

When redundancies do occur, they will sometimes involve the offer of settlement agreements to employees – this blog will explain what a settlement agreement is, and what you should do if offered one. Settlement agreements can be an opportunity to negotiate the best possible redundancy package for yourself, and seeking advice from a reputable law firm can help you to achieve that.

Here is the Browell Smith & Co guide to what you need to know if you’re presented with a settlement agreement.

What are settlement agreements and when are they used?

Settlement agreements came into force in 2013. They’re legally binding agreements that set out the full terms of a settlement between an employer and an employee.

A settlement agreement prevents employees from suing their former employer, usually after they have received a sum of money in return for agreeing not to bring certain claims against their employer.

Redundancies do not always lead to settlement agreements. Employers who believe they have conducted a fair process may decide to proceed to dismiss an employee without any kind of exit package.

If the redundancy is fair, employers need not pay any more than statutory redundancy pay unless a contractually binding policy is in place which sets out the amount to be paid.

However, many employers offer a settlement with an enhanced redundancy payment in order to ensure the employee makes a smooth exit from the business, and also to protect themselves against any claims.

What do settlement agreements mean?

Each settlement agreement will vary but usually the documents include sections that deal with the claims to be settled, the payments to be received and the relevant tax issues, and a confidentially/gagging clause, and any agreed reference from your employer.

When you sign a settlement agreement, your employment is terminated. You’ll typically receive a sum of money in return for losing your job and certain employment rights.

There are specific requirements for a settlement agreement to be binding.


Will I get a redundancy package if I was on furlough?

In July 2020, the government brought in a new law to ensure furloughed employees receive statutory redundancy pay. It is important to note that an employee is only entitled to statutory redundancy pay if they have been working for their employer for 2 years or more. This redundancy pay should be based on their normal wages rather than a reduced furlough rate so that those furloughed under the Coronavirus Job Retention Scheme are not short-changed if they are made redundant. The changes will also apply to statutory notice pay and other entitlements, providing some reassurance during this difficult time.


What should I do if I’m offered a settlement agreement?

1. Stay calm and write everything down

If you’ve been called into an online video meeting by your employer try to remain calm and composed during the meeting. It can be difficult to remember everything that is said in the moment of being offered a redundancy settlement but bear in mind there is no pressure on you to make a decision straight away. Don’t be afraid to ask questions, and write down everything that you can remember about what was said, as soon as you possibly can. You should also request your employer to send everything discussed in written form from their end.

2. Get advice an employment solicitor

It’s a legal requirement that you get advice from a qualified professional. A settlement agreement will only become binding once you have received independent legal advice on it.

A good employment solicitor can help you consider whether you’re getting a good deal and whether you have any grounds for a claim against your employer – such as discrimination or unfair dismissal.

Your employer might recommend a solicitor to you, but you are free to choose your own. In either case, your employer is required to pay the solicitor fees for you.

3. Make a decision

Making a decision is the hardest part. If you don’t sign the agreement, then you preserve your full rights to make a claim against your employer.

To decide whether an agreement is a good deal, you need to consider why you’re being offered the agreement and what rights you are being asked to waive as a result of you signing.

A lawyer can also help you negotiate a better deal, which may include a bigger pay-out. If you’re facing a period of unemployment, you need to be able to meet your household living expenses until you get another job. One of the considerations you need to make is whether the money that’s being offered is enough.

However, that will draw out the process, and it may be more stressful in the long-run. Your solicitor will advise you on the likely outcomes of each possible course of action and make recommendations for how to proceed.

Never be afraid to ask your solicitor questions about any part of the process – they are there to help you.

What is a protected conversation?

When you do come to negotiate your settlement agreement, you can ask for a protected conversation. A protected conversation enables both employee and employer to talk freely without worrying that statements from the conversation could be used as evidence in a potential tribunal claim. Note that an employer is allowed to have a protected conversation with an employee whilst on furlough leave. 


Speak to a Specialist Solicitor today! 

Visit our Settlement Agreement page to find out further information about settlement agreements, and how to appoint Browell Smith & Co as your solicitor. Contact our expert team today by completing an online enquiry form to arrange a call back to discuss your particular requirements.


Please note that this blog should be used as a general guide only. The advice given does not relate to special circumstances and we strongly recommend that you discuss your circumstances further with us.

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